Foreign investor visaEB-5 foreign investor visa program susceptible to fraud, misuse: GAO

The United States has launched dozens of investigations into fraudulent practices in a program, called EB-5, which grants Green Cards to foreigners who invest $500,000 in selected U.S. ventures. A Government Accountability Office (GAO) audit said the U.S. immigration service “faces significant challenges in its efforts to detect and mitigate fraud risks.”

The GAO report details efforts by DHS to deal with the problems plaguing the EB-5 program.

The report found that between January 2013 and 2015, the SEC (Securities and Exchange Commission) received more than 100 “tips, complaints and referrals of possible securities fraud” connected to the EB-5 program, and there are currently fifty-nine open investigations by different agencies into alleged EB-5 scams.

ABC News reports that the popular immigration program had created a brilliant opportunity for criminals and spies to enter the country, and attracted a great number of frauds (see more in this 2-part investigative report by ABC News).

The program grants foreigners who invest $500,000 or $1 million in a selected American business venture can an entry visa. The foreign investor can receive a Green Card if the venture creates ten or more American jobs after two years.

The GAO notes that the program is vulnerable to fraud, because many of the applicants care less about the success of the venture in which they invest and more about getting the Green Card, and can easily afford to lose $500,000 in order to get the card.

A DHS spokesman told ABC News that the “[department] remains committed to preventing fraud and ensuring the integrity of the EB-5 Program.”

The immigration agency said it agreed with GAO’s four recommendations to strengthen fraud prevention, detection, and mitigation capabilities in the program, and more accurately to assess and report on program outcomes and the overall economic benefits of the program.

Two leading U.S. Senators introduced legislation to clean up the U.S. immigration program for wealthy foreigners. Senate Judiciary Chairman Charles Grassley (R-Iowa) and Vermont Democrat Senator Patrick Leahy say the program could help to create thousands of jobs, but they note that the program had also been a magnet to foreigners who eager to circumvent the scrutiny of the traditional immigration process.

As Grassley said, “we’ve seen too many occasions where national security has been put at risk and job creation has taken a back seat.” “Our bill strengthens oversight, ensures greater accountability and transparency, discourages fraud, and provides a higher priority for national security,” he added.

Advocates of the program highlight the fact that the 10,000 visas allotted in 2014 for EB-5 investors were claimed within months. The EB-5 applicants’ money was invested in projects such as a Brooklyn basketball arena, a California winery, a Vermont ski lodge, even a Hollywood movie studio — and has created or supported an estimated 42,000 jobs.

The GAO report commends DHS for the department’s efforts to deal with EB-5 fraud problem, noting the agency improved “its fraud risk management efforts, including establishing a dedicated entity to oversee these efforts.”

Grassley is less sanguine, serting that “the program needs an overhaul so that national security isn’t at risk, fraud is minimized, and economic benefits are realized for Main Street.”